2021 (4) TMI 122 - AT - Central Excise

CENVAT Credit - sale of discarded scrap, i.e. used empty drums and empty bags - applicability of Rule 6 (3) of Cenvat Credit Rules, 2004 - HELD THAT - The perusal of Rule 6(3) makes it abundantly clear that Rule 6(3) is applicable only to the manufacturers that too those who manufacture two classes of the goods i.e. non-exempted and exempted goods. Apparently and admittedly the appellant herein is manufacturing only one kind of goods which is PP woven fabric. Admittedly the empty polythene bags of raw-material and the empty drums of power oil as have been cleared by the appellant, irrespective for consideration, are not the goods manufactured by the appellants. There has been an amendment in the Rule w.e.f. 01.03.2015 by virtue of Notification 06/2015 and the following explanation has been inserted - irrespective of the said amendment, scope of Rule 6 is still with respect to the inputs/inputs services used in or in relation to the manufacture of exempted goods along with manufacture of non-exempted goods. Hence, irrespective, exempted goods include non-excisable goods in view of the amendment in terms of Notification No. 6/2015 dated 01.03.2015 unless and until such exempted goods are manufactured that too alongwith the non-exempted goods by the assessee, applicability of Rule 6 does not at all arise. Thus, the said Rule has wrongly been invoked in case of the appellant for demanding the reversal of Cenvat Credit availed by him at the rate of 6% of the value of empty packets of raw-material and empty drums of the oils used by the appellant in manufacture of PP woven fabric when cleared for consideration - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Applicability of Rule 6(3) of Cenvat Credit Rules, 2004 to the given facts and circumstances.

Analysis:
1. The case involved M/s. Sundaram Packaging India Pvt. Ltd., engaged in manufacturing PP woven fabrics and availing Cenvat Credit on inputs, input services, and capital goods. The Department observed that the appellant cleared non-excisable goods without payment of duty, triggering a Show Cause Notice demanding reversal of Cenvat Credit under Rule 6(3) of Cenvat Credit Rules, 2004.

2. The appellant did not appear in person during the final hearing but requested a decision based on submissions. The Department highlighted an amendment in Rule 6 through Notification No.6/2015, emphasizing that non-excisable goods cleared for consideration fall under exempted goods, warranting Cenvat Credit reversal. The appellant cited an order by the same Commissioner, stating that payment was not required for discarded scrap sales.

3. The Tribunal analyzed Rule 6(3) of Cenvat Credit Rules, 2004, which applies to manufacturers dealing with both exempted and non-exempted goods or services. The appellant only manufactured PP woven fabric, not the cleared empty bags and drums. The Tribunal referenced the amendment specifying that exempted goods include non-excisable goods cleared for consideration, but clarified that Rule 6 applies to inputs used in manufacturing exempted goods alongside non-exempted goods.

4. Referring to legal precedents, the Tribunal concluded that Rule 6 was wrongly invoked as the appellant did not manufacture exempted goods alongside non-exempted goods. Citing judgments on excise duty for non-manufactured products and duty on containers used for packing, the Tribunal held that the demand for Cenvat Credit reversal was unfounded. The Commissioner's assertion that the bags and drums were excisable goods was deemed incorrect.

5. Consequently, the Tribunal set aside the order, deeming it legally unsustainable. The appeal was allowed, and the decision was pronounced in open court on 01/04/2021.